In a world where financial transactions and capital flows move in milliseconds, getting the right information about the state of a country’s economy is critically important. Unfortunately, the standard and still most reliable measure of the health of an economy, gross domestic product (GDP), has not kept up with the speed of financial markets. This puts emerging market countries at risk from financial gyrations, regardless of the underlying fundamentals of their economies.
Take for example Indonesia, one of the largest and most influential emerging market economies. Its GDP data is reported quarterly with about five weeks’ delay. This means that economic activity that takes place in January is not reported until the first week of May. While Indonesia is no outlier in its delay, it is still late for a real-time assessment of the strength of economic activity. Read more
Speculation is rife that Amazon is soon to establish itself as a global shipping and logistics expert, in a move coined internally as project ‘Dragon Boat’.
While this bold strategy has the potential to significantly increase margins and position Amazon as Chinese businesses’ gateway to the West, a considered and phased implementation is essential if the firm is to gain share of the cross-border e-commerce market from industry leader Alibaba. Read more
Since Hugo Chávez rose to power in February 1999, the Venezuelan government has been described by all manner of creative terms: competitive authoritarianism, illiberal democracy, hybrid regime and others.
Behind this semantic proliferation there has always been the notion that, despite evident authoritarian tendencies, the chavista regime never quite eradicated the democratic space. While independent media and journalists were harassed, they never disappeared. While elections were deeply biased, they took place regularly and on schedule. The opposition was always allowed to contend, votes were counted fairly and, on rare occasions, chavismo would lose. The government’s exercise of power was questionable, if not abusive, but the democratic origin of that power was difficult to refute. Venezuela was by no means a liberal democracy, but it was not a dictatorship; Chávez was no Lincoln, but he was also no Castro. Read more
Gabriel Zucman, author of The Hidden Wealth of Nations, estimates that 8 per cent of global wealth, or $7.6tn, is deposited in jurisdictions commonly known as tax havens. This includes the financial assets of individuals and companies who seek not to pay tax, or pay less tax, in their home countries. James Henry, an economist, lawyer and investigative journalist, estimates the value of unreported financial assets at between $21tn and $32tn.
In a democratic social contract, the financing of states requires every citizen to pay taxes according to their ability to do so. So it is necessary to curb the use of artificial mechanisms to avoid due taxes. One such mechanisms is “aggressive tax planning”, which explores gaps between different national tax laws and embraces legal and accounting manoeuvres for profit or asset shifting towards jurisdictions with favourable taxation and little tax transparency. Certain jurisdictions allow the concealment of the beneficial owner of profits and incomes, undermining the actions of tax authorities. Read more
for the FT's free emerging markets morning email briefings.
Select beyondbrics London
or beyondbrics New York
when you sign up here
Iran’s new approach to building energy allies is being revealed as the former powerhouse staggers back onto the global stage. The lifting of sanctions in January has given the country a new lease of life. Tehran’s ability to adapt will prove vital, as today’s market is more competitive than the one it reluctantly stepped back from more than a decade ago.
Tehran remains confident that it can continue to build on its current 3.7m barrels a day (b/d) of oil production, which already represents a rise of half a million b/d since February. This means the country is already close to its target of 4m b/d and Tehran has said it aims to export 2.2m b/d by the end of the summer. The country’s strategy to regain superiority has started well, although some of this spike in volume may be a case of Iran emptying its full storage capacity. Read more
By Ken Wong, Eastspring Investments
There is an even chance that, this summer, China’s A-shares will be included for the first time in a key emerging market investment index operated by MSCI, the index provider. If it happens, it will be a welcome development, for the simple reason that it will make the benchmark a more accurate reflection of the emerging market corporate universe.
While the immediate impact of inclusion would be quite small, the longer-run potential for A-shares – which are the stocks of companies listed inside mainland China – to grow in importance within the index is enormous.
Two obstacles to inclusion have been largely removed – reforms to a quota system on investment inflows from abroad and a shortening of the delay in repatriating capital out of China. Read more
We are facing a growing and menacing threat posed by pandemics. Recent years have witnessed SARS, bird flu, MERS, Ebola and now the Zika virus. With each new discovery, our response is bewilderingly clumsy, and we seem to be no more equipped to respond than before. In many ways, we tie our own noose. History is littered with examples of action performed too little, too late.
Increasing population density and transnational travel of people and commodities increase the risk of communicable disease. As the threat of pandemics is becoming more real, it is paramount to create robust systems at the international, national and local levels to cope with such outbreaks. A recent global health commission estimated the potential annual economic losses from pandemics to be $60bn. Despite this ominous threat, international efforts to mitigate the risks are woefully inadequate. Read more
You don’t hear much these days about capital outflows from China. The renminbi seems well behaved, and China’s foreign exchange reserves have stayed stable in the past couple of months. Sure, the economy itself faces a bunch of challenges, as the government hasn’t quite found a way to maintain rapid growth rates without a dangerous degree of reliance on credit. But you don’t get the sense that the Chinese are falling over themselves in a rush to buy dollars.
The Fed might take heart from this. On two occasions in the past year, the US Federal Reserve’s intentions to raise interest rates have been confounded by financial turbulence caused by large outflows from China. The first was last summer, when the Fed was forced to postpone rate hikes following a surge in flows from China after the People’s Bank of China (PBoC) introduced a new regime for fixing the renminbi on August 11th. The second was this winter, when another surge in outflows that coincided with the Fed’s December rate hike made it impossible for the Fed to keep doing so. Read more
Capacity utilisation (CU%) in the chemical industry has long been the best leading indicator for the global economy. The IMF’s recent downward revision of its global GDP forecast is further confirmation of the CU%’s predictive power. As the first chart shows, the CU% went into a renewed decline last October, negating hopes that output might have stabilised. March shows it at a new low for the cycle at just 80.1 per cent, according to American Chemistry Council (ACC) data. By comparison, the CU% averaged 91.3 per cent during the baby boomer-led economic supercycle from 1987 to 2008.
This ability to outperform conventional economic models is based on the industry’s long history and wide variety of end-uses. It touches almost every part of the global economy, enabling it to provide invaluable insight on an almost real-time basis along all the key value chains – covering upstream markets such as energy and commodities through to downstream end-users in the auto, housing and electronics sectors. Read more
Bitter experience in Europe tells us that trivialisations of painful historical events, especially if they come from leading political figures, can inspire thinking among electorates that eventually turns into self-fulfilling prophecies. That is exactly why numerous countries in western Europe have laws that prohibit and reprimand any trivialising comparisons with the heinous doings of the axis powers in the 1930s and 1940s that caused the loss of millions of lives and unspeakable suffering. So unspeakable, that most of our ancestors preferred not to share those experiences with their descendants to this very day…
That makes recent historical comparisons by two former mayors of London all the more serious and outright unacceptable to all those who were persecuted and sacrificed their lives in the past century and to those who were dedicated to building a new and “peaceful” European Union. The United Kingdom has been an integral and vital part of that process in the past century, including since it joined the EEC in 1973 and decided by referendum in 1975 to remain in the body that was originally formed in 1952 to secure peace on a continent soured by thousands of years of war. Read more
In 1987, when I was five months pregnant with my youngest child Uchechi, doctors told me they were concerned that his head was not growing fast enough. It was one of the most frightening moments of my life. I couldn’t bear it, the sense of powerlessness in being able to do nothing but wait. It took two long months of fortnightly sonograms before we were finally given the all clear. Although Uchechi was fine in the end, the terrifying experience will remain with us forever.
Today, nearly three decades later, my heart goes out to the hundreds of thousands of pregnant women in Zika-infested countries who are going through the same agonising experience of not knowing the fate of their unborn child, or even worse those with confirmed cases of microcephaly. As world leaders, policymakers and young people come together in Copenhagen this week to discuss health, rights and well-being of women and girls as part of this year’s Women Deliver global conference, this epidemic is a reminder that a gender gap exists in health as well as education, economics and politics. Read more
The travel industry has seen impressive growth in recent years as business travel recovers post-recession and rapidly growing middle classes from emerging markets have sparked an aviation boom. But despite the growth of low-cost mass-market travel, higher-yield premium and luxury trips are outpacing the market as a whole.
Our latest report, ‘Shaping the Future of Luxury Travel’, which is underpinned by data modeling from Tourism Economics, found that luxury travel had a global growth rate of 4.5 per cent between 2011 and 2015, 0.3 percentage points higher than the overall industry. Over the next decade, luxury travel’s growth rate is forecast to accelerate to 6.2 per cent, compared with a (still healthy) 4.8 per cent for the overall market. Read more
The debate on the future of Europe and Britain within it is heating up. This week, Boris Johnson highlighted the problems with “EU foreign policy-making on the hoof”, suggesting that it had contributed to the protracted conflict in Ukraine. He was quickly branded a “Putin apologist” by adversaries.
None of Boris’s critics seem to have noticed that this is a clear case of shooting the messenger. What Boris has done is raise a legitimate concern. He is giving Europe a long-overdue reminder that in order to survive, it needs to get stronger. Read more
By Michelle Chan, VP of Programs, Friends of the Earth US
As chair of this year’s G20, China is mounting an ambitious campaign to promote ways that the banking sector can not only green the Chinese economy, but the global economy too.
Over the past decade, China has prioritised sustainable finance policies as a means of preventing and controlling pollution via its banking sector, leading many to hope that China can lead the world on a greener path towards sustainable finance. The members of the G20 Green Finance Study Group, meeting next month in Xiamen, are certainly betting that China does have something to offer when it comes to green finance.
But have such Chinese finance policies actually led to concrete improvements for the environment? Read more
Last December, as part of their contribution to the Paris climate talks, a coalition of African governments and the African Union set a hugely ambitious goal to deploy 300 gigawatts of renewable energy by 2030.
That’s roughly the equivalent of Japan’s entire electricity capacity and nearly a third of that of the US, in a continent where hundreds of millions of people currently lack access to power. It will require an average annual deployment rate of 17 GW. Sub-Saharan Africa’s biggest annual deployment to date has been 2.6 GW. So, the 2030 goal means increasing yearly net capacity additions by a whopping 650 per cent. Read more
From Africa to the Far East, countries aiming to recover assets embezzled by former leaders and officials are facing a raft of challenges.
Nigeria’s President Muhammadu Buhari , attending an anti-corruption conference in London today, waved aside any call for an apology over UK prime minister David Cameron’s “fantastically corrupt” remark. Instead, he asked for help in recovering funds held in the UK. He summed up the challenge thus: “Unfortunately, repatriating stolen assets is tedious, time-consuming [and] costly. It entails more than just signing of bilateral agreements.” Read more
Women and girls bear the brunt of the world’s disease burden because, in too many places, they don’t have the tools—or the rights—to protect their own health.
We know that healthy women and girls create measurably healthier and more productive communities. A recent analysis by the McKinsey Global Institute estimates that advancing gender equality could add $12tn to global GDP by 2025. That’s $12tn with a “t.”
When 10 per cent more girls are healthy enough to go to school, a country’s GDP increases by about 3 per cent. Healthy girls and women learn more, earn more, produce more, and raise healthier children. Read more
Brazil’s economy and politics have long been playing with fire. Now the rest of the world risks getting burnt by waiting for the crisis to be addressed domestically. The country could learn a lot from Spain’s 2012 rescue package from the International Monetary Fund.
Brazil’s is one of the largest emerging market economies, close to the size of Germany’s. Its GDP is $3.2tn in purchasing power parity terms. It is the largest economy in South America, with huge knock-on effects on other countries in the region. It is also very financially open, making up nearly 7 per cent of the MSCI Emerging Markets equities index; its weight is even bigger in EM debt markets. Read more
Members of the board of governors of the European Bank for Reconstruction and Development will choose the bank’s next president on May 11. It has been clear for some time that they will re-elect the current one – Sir Suma Chakrabarti – despite a heavyweight challenger in the form of Marek Belka, the governor of Poland’s central bank. For this reason, this election is generating less excitement than the previous one when five candidates (myself included) squared off in one of the more open races for the helm of a multilateral institution.
Truth be told, Sir Suma and his team have done a good job under demanding circumstances. In addition to the global economic slowdown and related woes with non-performing loans, the EBRD has had to deal with many specific challenges: the start up of its operations in Arab Spring countries, a supposedly temporary expansion of its mandate to Greece and Cyprus, and significant retrenchment from Central and Eastern Europe by western banks. Last but not least, the Ukraine-related decision of a majority of its shareholders to stop new projects in its biggest and most profitable market, Russia, required deft redeployment of financial and human resources. Thankfully, the EBRD has come out of this turbulent period with a rare AAA rating, a comfortable capital cushion and recovering profitability on an expanded portfolio. Read more